Coronavirus and real estate: can I make a landlord insurance claim for loss of rent?

As residential and commercial tenants face financial hardship amid the coronavirus outbreak, landlords are looking to their insurance to mitigate their losses.

Many landlords are seeking to make a claim through their building or landlord insurance policy to cope with the financial fallout, as tenants request reductions or abatements of their rent.

Here is our advice to commercial and residential landlords regarding insurance options during the coronavirus (COVID-19) pandemic:

What are the insurance options for commercial landlords?

According to advice received, policies covering commercial properties exclude cover for any diseases that have been declared to be notifiable or ‘quarantinable’ diseases under Commonwealth legislation.

As the federal government has declared COVID-19 as a listed human disease under the Biosecurity Act 2015, the policy exclusion applies, meaning rent losses directly attributable to COVID-19 are not covered by insurance.

At this point, insurers continue to confirm that no cover applies.

Unfortunately, there is presently no insurance protection for a downturn or a closure of a business.

What are the insurance options for residential landlords?

For residential landlords, there is an optional coverage for rent default under most landlord covers.

The need for this optional cover is often mitigated by the engagement of a professional property manager.

The real estate sector provides a valued service and it will be the first point of contact to help manage the process if a tenant stops paying rent.

The bond is often claimed to meet some of the losses and is deducted from any insurance considerations.

Insurance provisions generally require ‘all reasonable steps legally available’ to be taken under the relevant Tenancies Act in each state to recover the loss, with the insurance benefit following the outcome of the action to recover the loss.

In the current circumstances however, it may be wise to include this cover and pay the extra premiums associated with rent default, however we understand that insurers are, or will likely be, removing this option very soon.

How LDB can help you

As this health and economic emergency continues, it’s important that landlords get the right advice about their options.

LDB’s trusted real estate specialists are helping landlords navigate the COVID-19 crisis, offering tailored advice and other property services during this difficult time.

Our real estate team works closely with financial advisors, chartered accountants, and lending and finance brokers to provide clients with a truly comprehensive property and real estate consultancy service.

If you want to discuss your options, give us a call on (03) 9875 2900 or send us a message via the contact form below.